Citigroup says that oil prices could fall to $65 per barrel if there is a global recession.
According to Ed Morse (the bank's global head for commodity research), "Thus far we are not in a crisis environment." While the economies of some countries may be slowing faster than others, the global economy is not in recession. This scenario is more likely than not this year.
Morse and his colleagues currently forecast a 40% chance of a global recession. This is defined as two consecutive quarters with a drop in the world’s GDP.
Oil futures fell below $100 per barrel Tuesday due to concerns that a slowdown of the global economy might reduce the world's demand for crude oil. They also fell on Wednesday.
However, earlier in the year, there were fears that Russia's invasion would cause disruption to global oil supplies. Morse said that instead of conflict and sanctions limiting oil supply, it created a two-tiered marketplace. The analyst stated that Russia has managed to find new customers and sell at a discount of 30% to 40%.
Moscow has been increasing its oil exports at a lower price to other buyers like China and India, as the G-7 countries and the European Union have stopped imports from Russia. Europe has been raising the price of oil from other countries, amid sanctions that have prohibited Russia's crude. Morse observed that Saudi Arabia has decided not to make up the Russian shortfall.
This drop in oil prices comes after a steady fall in U.S. gasoline prices since June's record highs. Regular gasoline is now selling at less than $5 per gallon at most U.S. stations.
According to Patrick De Haan, GasBuddy analyst, prices should fall back below four dollars per gallon at thousands stations across the country over the coming days and weeks.
GOOD NEWS: In the coming days and weeks, we will see hundreds, nay thousands, of stations drop below $4 per gallon.
"The stations that can fall to $3.99 or lower will be concentrated in states such as South Carolina, Georgia and Mississippi, Louisiana, Arkansas. Texas, Alabama, Tennessee, North Carolina DeHaan explained in a tweet.
On Wednesday, the national average price for a gallon gas was $4.78. This is a decline of 9 cents in the last week. AAA attributes this to the fact that there were fewer people filling up the tank over the past two weeks.